CBM Asia closes LoI to acquire Sekayu PSC
CBM Asia Development Corp. has closed its letter of intent with, inter alia, Batavia Energy Inc. to acquire, indirectly, 24% of South Sumatra Energy Inc. ("SSE"), a private company jointly owned by PT Ephindo and Batavia, which together with Jakarta-based operator PT Medco Energi Internasional Tbk, holds the production sharing contract (the "Sekayu PSC") for coalbed methane on the 58,349 hectare "Sekayu" block located in the South Sumatra Basin, Indonesia.
Under the terms of the LOI, CBM Asia has paid an upfront cash payment of US$730,000 and is required to fund US$3,243,500 in exploration expenditures on the Sekayu block over the next three years to earn an estimated 12% working interest in the Sekayu PSC.
A second cash payment of US$350,000 (the "Second Installment") is payable on or before March 1, 2011 provided that the Company has the right, in its discretion, to prepay such payment on or before March 1, 2010 for a reduced amount of US$270,000.
If the Company fails to make the Second Installment, its estimated working interest in the Sekayu PSC will be reduced from 12% to 11%. Under the terms of the LOI, the Company also has the sole and exclusive right to provide financing for up to an additional 24% interest in SSE representing the remaining estimated 12% working interest in the Sekayu PSC.
Alan T. Charuk, the President and Chief Executive Officer of CBM, has been nominated for appointment as a director of SSE, which appointment should be effective within 30 days.
CBM Asia President and CEO Alan Charuk commented on the closing of the Sekayu interests, "This transaction demonstrates our commitment and ability to identify and acquire valuable coalbed methane assets in Asia," Charuk said in a statement to TSX Ventures yesterday.